State of distress

SummaryA combination of populism used with reckless abandon and economic shortsightedness has driven the state towards bankruptcy.

A combination of populism used with reckless abandon and economic shortsightedness has driven the state towards bankruptcy. In 1980-81, West Bengal produced 9.8 per cent of the industrial output produced in India; in 2009-10, it was only 4.32 per cent. Employment in the organised sector came down from 10.84 lakh to 5.72 lakh during the period. The culture of gheraos and strikes fuelled by power shortage gradually drove industry and capital away from this state, just as the intense politicisation of its once-famed academic institutions drove its talents away.

This decay continues unabated, signs of which had earlier metamorphosed into social and political turmoil. The state polity became dominated by violence and its governance by corruption. West Bengal became a ‘party state’ that allowed no dissent, turning it into a vast instrument of coercion caught in a time warp where the clock of progress and flow of ideas almost came to a standstill. Finances were in a shambles with the state struggling to pay the salaries of its huge army of staff. Its growth plummeted and debt burden rose steeply.

The total outstanding debt liabilities of the state has mounted from a manageable level of Rs 1,441 crore or 20 per cent of the state income (GSDP) in 1977-78 to an astounding level of Rs 175,366 crore or 37 per cent of its GSDP at the end of 2010-11, rising annually by 15.66 per cent since 1977. The annual interest burden on this huge debt has increased from a modest Rs 73 crore to Rs 13,817 crore over this period. Almost two-thirds of the state’s own revenues are spent towards meeting the interest charges alone. But the sorry fact is that the state failed to use the debt resources for creating income generating capital assets, but used it almost wholly to repay the past debt and interest. Consequently, capital outlay in the state remained one of the lowest in the country. Even Bihar had a capital outlay almost four times that of West Bengal in 2010-11.

Other states also faced the debt problem, but they introduced fiscal discipline by enacting the Fiscal Responsibility and Budget Management Act (FRBMA) at the prodding of the Twelfth Finance Commission and, by reducing their revenue deficit side by side, managed to lighten their debt burden. But by refusing to enact the FRBMA till July 2010, West Bengal had forgone a debt relief amounting to Rs